The Walt Disney Company (DIS) unveiled its second-quarter earnings this morning that came in above the analyst consensus fueled by the streaming segment – however, concerns surrounding the company’s traditional business model have sent shares 10% lower so far.

Revenue for the quarter came in at $22.08 billion, just shy of the $22.11 the LSEG consensus called for. Adjusted earnings per share surpassed the consensus, though, at $1.21 compared to $1.10.

Total operating income got a 17% boost thanks to improvements in both Disney+ and Hulu. These two segments were profitable for the first time in company history, but streaming as a whole was held back by the ESPN+ business. This worked out to a total loss of $18 million, which was much better than the $659 loss reported this time last year.

The streaming side of the business was complimented by continued success in Disney’s experiences business. Revenue climbed to $5.96 billion, a 7% improvement year over year. 

So, why is DIS down today? There’s concern about the TV business, which has been a recurring theme in these earnings reports over the past few years. More and more customers are dropping cable in favor of streaming. 

There was also a 40% drop in content sales, licensing, and other revenue as the company didn’t bring any blockbuster movies to the theaters this quarter. In comparison, “Avatar: The Way of Water” brought in $2.3 billion in sales this time last year.

The company also readjusted its guidance for the third quarter as it’s now forecasting a loss in its entertainment DTC business unit, although Disney is still expecting streaming profitability for the fourth quarter. 

Just last month we wrote about the internal turmoil at Disney amidst a proxy battle with activist investors. Iger’s return was under threat, but it appears to be smooth sailing going forward on that front.

The stock has gained 16% so far this year, but has tumbled today on this news. So, where does this leave investors or prospective traders? We’ve got three key takeaways you need to see that we uncovered through the VectorVest stock forecasting software.

DIS Has Fair Upside Potential and Safety, But Poor Timing is Holding the Stock Back

VectorVest is a proprietary stock rating system that helps investors win more trades with less work and stress. It gives you all the insight you need to make calculated decisions in 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT).

Each sits on its own scale of 0.00-2.00 with 1.00 being the average, making interpretation quick and easy. Just pick safe, undervalued stocks rising in price! Better yet, you can follow the clear buy, sell, or hold recommendation offered for any given stock at any given time based on its overall VST rating. Here’s what you need to know about DIS today:

  • Fair Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This is a far superior indicator than the standard comparison of price to value alone. DIS has a fair RV rating of 0.96 right now. The stock is overvalued, though, with a current value of just $74.67.
  • Fair Safety: The RS rating is a risk indicator computed through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. DIS is a fairly safe stock with an RS rating of 0.94.
  • Poor Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year to paint the full picture for investors. DIS has a poor RT rating of 0.79 right now after this morning’s performance.

The overall VST rating of 0.89 is fair for DIS and the stock is currently rated a HOLD in the VectorVest system. Learn more about this situation and make your next move with complete confidence and clarity with a free stock analysis today!

Disney Delivers Solid Earnings as Streaming Nears Profitability, But DIS Dives 10%: 3 Key Takeaways
VectroVest Stock Advisory App

Want These Types of Insights at Your Fingertips so You Can Win More Trades?

Use VectorVest to analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.

VectorVest advocates buying safe, undervalued stocks, rising in price. DIS is down more than 10% so far this morning after delivering solid Q2 earnings, but the market seemed to react primarily to the concerns surrounding the outlook for its entertainment direct to consumer unit in the quarter ahead.

Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action!

What you should do next…

  1. Get our latest blogs delivered right to your inbox, subscribe to our newsletter.
  2. The market moves fast! Get our most current evaluation of this stock with our FREE stock analysis tool.
  3. Looking for stock picks? Not sure if now is the right time to buy/sell? For a limited time, enjoy the full benefits of a 30-day subscription to VectorVest for only $0.99 (usually up to $148/month) . Get access to our full list of screeners showcasing our top stock picks that tell you exactly what to buy, when to buy, and when to sell.